St. John's picks Providence Health & Services in bidding war

After months of controversy, the owner of St. John's Health Center said it plans to sell the landmark Santa Monica hospital to Catholic chain Providence Health & Services.

The hospital has been at the center of an intense competition that featured bids from UCLA Health System, other Catholic hospital chains and Los Angeles billionaire Patrick Soon-Shiong.

After weighing the offers, the Sisters of Charity of Leavenworth Health System in Denver said Friday that it was entering exclusive negotiations with Providence, which owns St. Joseph Medical Center in Burbank and four other Southern California hospitals.

Michael Slubowski, chief executive of the SCL Health System, said Providence was an ideal choice because it's the largest provider of Catholic healthcare in Los Angeles County with a strong network of hospitals and physicians.

"Partnering with Providence will place St. John's on a sustainable path forward," he said.

The proposed deal for the nonprofit Catholic hospital is still subject to approval by the California attorney general's office and the Roman Catholic Archdiocese of Los Angeles.

Financial terms were not disclosed and St. John's parent company said there was no timetable for finalizing the sale of the 266-bed hospital, which has long catered to celebrity patients such as Michael Jackson, Elizabeth Taylor and Maria Shriver.

Providence spokeswomanPatricia Aidem said, "We're honored that we were selected and we are looking forward to sitting down to negotiate." Providence declined to discuss its bid further because negotiations are ongoing. The Renton, Wash., nonprofit company runs 30 hospitals in California and four other states.

The Archdiocese of Los Angeles, which had indicated support for Soon-Shiong's bid, nevertheless welcomed the news. In a statement, the church said it was pleased that both parties are "committed to continuing the tradition of community-based Catholic healthcare at St. John's."

All this comes several months after an ugly management shake-up at the hospital. In November, its Denver owner abruptly fired most of the local board members and ousted the top two executives. Soon after, the company began fielding offers for St. John's.

A wave of consolidation has swept across the healthcare industry in recent years, stemming in part from new financial pressures from the federal healthcare law. St. John's, like many stand-alone community hospitals, had struggled to compete without ties to other healthcare providers. Such collaboration is considered crucial to get patient referrals and to gain leverage with insurers.

This week, Soon-Shiong, a doctor and former drug-company executive whose net worth tops $7 billion, went public with his own bid for the hospital. His proposal also had the backing of the hospital's foundation and its medical staff.

Soon-Shiong had committed $100 million to St. John's over the years and already has his name on several buildings there. He has been spearheading several ambitious projects there on genomic research and other medical advances. Soon-Shiong couldn't be reached for comment Friday.

Donna Tuttle, chairwoman of the St. John's hospital foundation, supported Soon-Shiong's bid, and she said she would urge Providence to consider teaming up with him.

Providence is "not my first choice. I don't know much about them," Tuttle said. "I think of Patrick as a visionary, so we are wondering if there is any way to bring them together."

Tuttle said she was relieved the bidding group including UCLA was not picked. She and others in the community had expressed concern that taking over St. John's would give UCLA too much market power on the city's Westside and limit patient choices.

That proposal called for UCLA to operate St. John's and for ownership to be held by two large Catholic hospital chains, Ascension Health Alliance in St. Louis and Dignity Health in San Francisco.

St. John's, founded by nuns during World War II, reported losses of $21.9 million for 2010 and $12.8 million for 2011, state records show. Slubowski had said that depreciation on new buildings accounted for most of those losses and that the hospital generates positive cash flow.

"With the most extensive network of Catholic hospitals and physicians in the region," Slubowski said, "Providence is well positioned to succeed."